Q. Will I take a tax hit since I have 529 distributions in 2021 per 1099-Q but have no 1098-T to enter for 2021?
A. No. Since you actually made payments, in 2021, you can claim those payments against the 1099-Q, as well as any other qualified expenses (books, computers, room and board)
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip!
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
If you do need to enter it, enter the 1099-Q first. Then enter expenses at Deductions and Credits / Education expenses & scholarship. Answer no to the 1098-T, but check the box that you qualify for an exception. That will allow you to enter expenses. To get the screen to enter Room & Board, answer yes when asked if you have book expenses.
